Prospective car buyers talk with a sales manager at a car showroom in Mumbai. Photo: AFP

With localized lockdowns in various states crippling their business, Indian automotive dealers are now seeking relief from the government and the central bank.

The industry body Federation of Automobile Dealers Associations has written to Finance Minister Nirmala Sitharaman and Reserve Bank of India Governor Shaktikanta Das seeking fiscal support to tide over the current crisis, Press Trust of India reports. It has urged the government to provide a three-month extension to file goods and services tax.

The association also wants the central bank to provide guidelines to lenders and shadow banks to offer loan moratoriums. It has sought moratoriums for the payment of installments of term loans, short term loans, corporate loans, inventory funding and cash credit lines, among others.

Automobile showroom owners make an upfront payment to automakers while purchasing vehicles and this is usually funded through loans with a payment cycle of 30-90 days. They argue that lockdowns affect their ability to clear the inventory and loan repayment capacity. The association wants banks not to countthe durations of lockdowns when calculating repayment schedules.

The industry body claims that the current localized lockdowns announced by various states to contain the Covid-19 second wave has forced three out of every four showrooms in the country to temporarily shutter. These lockdowns cover major metropolitan markets such as New Delhi, Mumbai, Bangalore and Chennai.

Unlike the first wave, this time even the rural demand has taken a hit as the current wave is widespread in the country’s villages and small towns. All this has crippled demand, as people put off discretionary purchases to focus on essentials and medical emergencies.

According to data released by the association earlier, the total vehicle registrations in India fell by 28% to 1,185,374 units in April versus 1,649,678 units in March. Market observers feel that May sales may dip further with more states having announced curbs this month on the movement of people following a surge in coronavirus cases. For many dealers this would mean a further shrinkage of working capital, as fixed costs such as rent and salaries will continue.

The industry body has cautioned that if prompt action is not taken, it will severely impact the auto retail sector. It noted that many of the dealerships are family-run enterprises, and they may not be in a position to hold on for long.

India’s coronavirus caseload has crossed 23 million and the official death toll is over 258,000. It is second only to the US, which has a caseload of over 33 million. However, in the past seven days, India has added the highest number of fresh cases at 2,682,192, followed by Brazil (424,236) and the US (274,987).